TOP AGENT WON’T REFER CLIENTS TO CLOSE FRIEND:
This week, Heejin (my wife & co-founder) was visiting a top producing Realtor in Texas who refused to refer clients to her close friend who was a loan officer. The reason? Her friend’s rates were too high and her clients complained. This was just another indication of how much more important rates are now, even in markets like Texas where loan amounts are much smaller.
BORROWERS LEAVE US FOR A FEW HUNDRED DOLLARS IN FEES:
Last week, two borrowers left us for a “private banking” mortgage (with a “big bank”) over a few hundred dollars in fees, after Andrei (from our office) spent at least five hours pre-approving and educating them. It was particularly frustrating b/c the private banking loan officer did virtually nothing on the education front, and knows little about mortgages in general (this was apparent b/c the borrowers shared some of his emails). But, this is another indication of how extremely rate-sensitive (and fee sensitive) borrowers are.
MORTGAGE BANK’S MIDDLE MANAGER GLUT:
About a year ago, a large mortgage bank was recruiting us to join its ranks. To impress us, they put us on a conference call with a large number of middle managers who handled compliance, marketing, secondary, and numerous other roles. It quickly became apparent that very few of those managers did anything to help loan officers close more loans, and all of them were paid … a lot. As a result, the mortgage bank had very high rates, and we quickly said “no thanks” to their offer. Too much management overhead is a recurring theme among many mortgage banks and loan officers are rebelling, as they don’t want to have to sell higher rates in order to subsidize management ranks.
FANNIE MAE’s LENDER SURVEY – BAD NEWS:
Fannie Mae recently reported that the profit outlook for the mortgage industry as a whole is at an all-time low.
AVERAGE LOAN OFFICER COMMISSIONS:
And lastly – I recently learned from a prominent banking consultant that the average commission for loan officers nationwide was 105 basis points (or 1.05% of the loan amount). The consultant fervently believes that these commission levels are not sustainable in today’s lending environment, with so much competition for low rates.
I tell all of these stories to illuminate how drastically the mortgage landscape is changing.
TWO BIG TAKEAWAYS
- Interest Rates Matter To Borrowers More Than Ever. I have been repeating this for some time, but it amazes me how rate-sensitive borrowers are now. The reason is too much competition and rates being readily available online. But – if you’re a Realtor in any market, you need to be certain your lender offers the lowest possible rates (along with great service), or, rest assured, your clients will complain.
- Shake-out and Shake-up. The traditional mortgage bank models with fat management structures and large loan officer commissions are no longer viable. Expect to see loan officers moving to new firms often, and expect to see many lenders either drastically restructure or disappear altogether.
Jay Voorhees
Founder/Broker | JVM Lending
(855) 855-4491 | DRE# 01524255, NMLS# 335646
